What a woman/man/child is worth

30 Jan

Salaries of high earners have been in the spotlight in over the past few weeks following news that the Christchurch City Council Chief Executive received a 14.4% pay increase taking his pay to $538,529. This comes following news that the gap between rich and poor has grown more in New Zealand over the past two decades than any other developed country. The pay rise was vigorously defended by the Chief Executive Tony Marryatt, who stated he had “worked exceedingly hard this year” and that he “should be paid the market remuneration for the job and what is appropriate for my level of performance”. (He has however since succumbed to public pressure and declined at least part of his pay rise).

These two arguments are common ones made in defense of high salaries for executive positions – a) that they work hard, and b) that the market demands it. In response to the first argument, I’m sure they do work hard, but so do a great many that are in positions that are not so well paid. In response to the second argument, perhaps this notion of allowing ‘the market’ to determine what is appropriate, necessary and fair (for Marryatt also states he should be paid fair remuneration and hence seems to view the two as synonymous) needs questioning. As Tim Hazeldine, Professor of Economics at Auckland University, states on the growing pay rates of executives in New Zealand:

“Is there any objective reason why Professor Stuart McCutcheon, the current vice-chancellor, should be paid 40 per cent more than Dr John Hood earned for doing the same job in 2001, or indeed why Dr Hood should have received an even larger premium over the salary of his distinguished predecessor, Sir Colin Maiden? Is there any objective reason why vice-chancellors’ pay should have increased in real terms four times more than pay on the shop-floor? The answer is: no. No objective economic reason justifies these income discrepancies. There is no evidence that McCutcheon is “worth” 40 per cent more than Hood, or six times more than a senior lecturer. Nor is there any objective rationale – in terms of increased contribution to the economy – for the even larger pay discrepancies generated in the private sector. Why does the New Zealand economy now need 26 chief executives to be paid more than $1 million a year, when 11 years ago we had none?”

The articles on pay rates in New Zealand and the comments that have followed reveal a continued deeply held belief that those that earn high salaries deserve them, and conversely that those who don’t, do not . However, this position highlights a lack of understanding of how the system works in reality; that there is not equality of opportunity in New Zealand. Many begin life with a lot more opportunities than others and some far fewer, and these accumulate as life goes on. It is not simply a matter of some working hard and others being lazy. A study following a group of New Zealand children from different backgrounds supports this, showing that the children born to parents with low incomes are likely to end up on lower incomes, and conversely children born to parents on high incomes are likely to end up earning higher incomes. Thus the home that one is born into plays a determinant role in our future job prospects by passing on access to resources and an appreciation for education, skills for ‘success’, self belief and esteem. And what family we are born in to is simply a matter of luck.

Adopting a punitive approach to low earners or beneficiaries is further unconstructive if one wants to live in a safe and cohesive society.  Another article featured in past weeks was that on the rise of female crime and the projection that is will increase unless the issues that underpin it are addressed. Critically, it points out that of those that are in prison the majority of them suffer from mental health issues, addictions, have limited education, and have histories of abuse. It should not be surprising then that these women end up in prison.  Sadly, this is not a new development in terms of understanding the paths of those who end up in jail, however a continued punitive approach to crime means that it needs to be raised again and again.

Returning to the issue of high salaries, perhaps the issue is not so much what these people are earning, but that they are earning it while others are continuing to struggle, for these two are not unrelated. For example in the case of City Council Executives, their pay comes out of rates paid by individuals, and in Christchurch many ratepayers have lost their homes and their jobs in the past year following the earthquakes. Elsewhere in the country many families are struggling with high food and power prices and generally low incomes comparative to costs in New Zealand.

We are all children at some point. Where we are born into plays a large part in determining where we end up. It is not simply a matter of ‘working hard’ – it is far more complex. To understand this, and come up with solutions based on this, rather than simply blaming individuals, would ultimately see better outcomes, and isn’t that what everyone wants?

Laura Barrett

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